Panel still mulling retirement reform

House Finance leans toward passing bill

Posted: Sunday, May 01, 2005

Four lawmakers tasked with the job of retooling the Alaska Legislature's retirement-system reform for public employees and teachers returned with a draft Saturday that may give new employees more money for their accounts.

The House Finance Committee recessed until today to vote on the controversial bill that converts the retirement system from a "defined benefit" to a "defined contribution" plan for new employees, similar to 401(k) plans offered by private companies.

Voting records from Saturday showed six of the 11 finance committee members in full support of the bill.

The Senate made it clear that SB 141 is the most important bill of the session when they suspended all meetings Friday in protest of House delay of the bill.

"There's serious concerns about the most substantive piece of legislation that this body's been working on being put into a subcommittee," Senate President Ben Stevens, R-Anchorage, told the Associated Press.

The Senate majority placed empty boxes, wrapping tape and bubble wrap in front of their doors Friday, sending a message that if the bill doesn't pass, they'll leave.

For the minority forced to go along with the plan, Sen. Kim Elton, D-Juneau, said it was like being "caught in a fight between elephants."

Opponents of the bill say new employees are at risk as they will not get monthly pension checks and full-paid medical benefits. Instead, they will get a lump-sum amount upon retiring and must pay a percentage of their medical premiums.

"We're sharing the cost, but totally shifting the risks," said finance committee member Eric Croft, D-Anchorage.

The House today will continue mulling over 25 amendments to the bill, some which already were approved Saturday, such as asking employers to contribute more - 5 percent instead of 4.5 percent of the employee's salary - into the individual's account.

Employers will also contribute 2.5 percent of the employee's wages into a Health Reimbursement Arrangement, an account reserved for medical expenses that can be used to pay the medical premiums.

Death and disability benefits will be included for peace officers and firefighters, but the format is changed to fit the defined contribution system. Instead of giving survivors a percentage of the deceased employee's wages, spouses, for example, will get $500,000.

Overall, employers will either pay the same as or less than what they pay now for this new tier of employees, said Rep. Mike Kelly, R-Fairbanks.

An unfunded liability for the system is growing beyond $6 billion. The shortfall was caused by increased medical fees, poor performance on stock market investments, underestimating system liabilities and employees retiring earlier and living longer, lawmakers said.

To catch up with that debt, some municipalities and school districts are paying as much as 50 percent of employee wages for the retirement system.

Several members of the finance committee have suggested alternatives to passing SB 141, such as gathering more research during the interim and rewriting the plan or creating some kind of hybrid.

The committee will vote today on amendments concerning how much the new system will cost the new employee.

The Senate version of the bill asked current employees to contribute .5 percent more of their wages to help fix the system. The stipulation was taken out of the House version based on a legal opinion advising against it.

• Andrew Petty can be reached at

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